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January 18, 2005
There Is So Much Funny About Social Security
...younger people are very, very excited about the possibility of having at least a small portion of the Social Security taxes that they already have to pay anyway go into a personal retirement account... that they could leave to their heirs.
I laughed out loud when I saw this.
Maybe you didn't, though. Let me explain.
Right now Social Security is an "annuity." Annuities guarantee you will receive a certain benefit for as long as you live. This is a great deal if you live longer than average, because you keep getting that cash. It also provides enormous peace of mind, because you know you won't outlive your money. But it's not a great deal if you die early -- not for you, and not for your heirs. Of course, being dead, you have other things on your mind. But perhaps your grandchildren get upset they can't inherit your Social Security checks.
If Bush and McConnell succeed, this would change. You would continue to get a (greatly reduced) annuity from Social Security. But you'd also have money in a personal retirement account. When you retire, you'd depend on your (greatly reduced) Social Security annuity, plus the money in your PRA.
But here's the deal: if you live longer than average, you would likely outlive your money. That is, you'd spend all the money in your PRA. Then you'd have to depend solely on the much smaller Social Security annuity.
Or to put it another way: you'd only have something left in your PSA to leave to your heirs if you die earlier than average... and the closer to "average" you got, the less you'd have.
Thus, McConnell was essentially saying this:
...younger people are very, very excited about the possibility of dying young.Posted at January 18, 2005 04:04 AM | TrackBack